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1 Strictly embargoed until 07:00: 30 April 2019. Focusrite Plc (“Focusrite” or “the Group”) Half Year Results for the period ended 28 February 2019 Focusrite Plc, the global music and audio products company supplying hardware and software products used by professional and amateur musicians, today announces its Half Year Results for the six months ended 28 February 2019. Financial highlights Group revenue up by 4.1% to £40.4 million (0.5% at constant currency 1 ) (HY18: £38.8 million) EBITDA 2 up by 11.4% to £8.9 million (HY18: £8.0 million) Operating profit up by 16.4% to £7.3 million (HY18: £6.2 million) Profit before tax up by 22.6% to £7.2 million (HY18: £5.8 million) Basic earnings per share up 23.3% to 11.1p (HY18: 9.0p) Diluted earnings per share up by 23.6% to 11.0p (HY18: 8.9p) Net cash of £26.2 million (FY18: £22.8 million, HY18: £19.7 million) Interim dividend of 1.2 pence, up 20.0% from 1.0 pence in HY18 Operational highlights Revenue growth in line with expectations on top of record period last year Gross margin improved to 44.3%, helped by prompt action in response to US tariffs R&D remains core: two new products launched and five software upgrades Focusrite and Focusrite Pro still increasing market share Cumulative downloads of apps now up to 10.5 million Tim Carroll, Chief Executive Officer, commented: “Overall this was another pleasing performance with revenue exceeding that of the record revenue last year, and profit and cash rising more substantially. This has been reflected in the increased dividend. The Group needs to remain mindful of macroeconomic and political factors that affect its business, most notably import tariffs in the US, Brexit uncertainty and foreign exchange rates, but has strategies in place to deal with these. “The Group has a strong new product pipeline with several important launches planned during 2019. We have established ourselves as a market leader and our aim is to capitalise further on this by continuing to excite and empower our customers. We look forward with continued confidence.” 1 The constant currency revenue growth rate is calculated by dividing the sum of all transactions in HY19, translated at the average exchange rate for the relevant currency in HY18, by the sum of all transactions in HY18, translated at the same average exchange rate. 2 Comprising of earnings adjusted for interest, taxation, depreciation and amortization. This is shown on the face of the income statement. Dividend timetable The timetable for the interim dividend is as follows: 9 May 2019 Ex-dividend Date 10 May 2019 Record Date 5 June 2019 Dividend payment date
Transcript
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Strictly embargoed until 07:00: 30 April 2019.

Focusrite Plc (“Focusrite” or “the Group”) Half Year Results for the period ended 28 February 2019

Focusrite Plc, the global music and audio products company supplying hardware and software products used by professional and amateur musicians, today announces its Half Year Results for the six months ended 28 February 2019.

Financial highlights

• Group revenue up by 4.1% to £40.4 million (0.5% at constant currency1) (HY18: £38.8 million)

• EBITDA2 up by 11.4% to £8.9 million (HY18: £8.0 million)

• Operating profit up by 16.4% to £7.3 million (HY18: £6.2 million)

• Profit before tax up by 22.6% to £7.2 million (HY18: £5.8 million)

• Basic earnings per share up 23.3% to 11.1p (HY18: 9.0p)

• Diluted earnings per share up by 23.6% to 11.0p (HY18: 8.9p)

• Net cash of £26.2 million (FY18: £22.8 million, HY18: £19.7 million)

• Interim dividend of 1.2 pence, up 20.0% from 1.0 pence in HY18

Operational highlights

• Revenue growth in line with expectations on top of record period last year

• Gross margin improved to 44.3%, helped by prompt action in response to US tariffs

• R&D remains core: two new products launched and five software upgrades

• Focusrite and Focusrite Pro still increasing market share

• Cumulative downloads of apps now up to 10.5 million

Tim Carroll, Chief Executive Officer, commented:

“Overall this was another pleasing performance with revenue exceeding that of the record revenue last year, and profit and cash rising more substantially. This has been reflected in the increased dividend. The Group needs to remain mindful of macroeconomic and political factors that affect its business, most notably import tariffs in the US, Brexit uncertainty and foreign exchange rates, but has strategies in place to deal with these. “The Group has a strong new product pipeline with several important launches planned during 2019. We have established ourselves as a market leader and our aim is to capitalise further on this by continuing to excite and empower our customers. We look forward with continued confidence.” 1 The constant currency revenue growth rate is calculated by dividing the sum of all transactions in HY19, translated at the average exchange rate for the relevant currency in HY18, by the sum of all transactions in HY18, translated at the same average exchange rate. 2 Comprising of earnings adjusted for interest, taxation, depreciation and amortization. This is shown on the face of the income statement.

Dividend timetable

The timetable for the interim dividend is as follows: 9 May 2019 Ex-dividend Date 10 May 2019 Record Date 5 June 2019 Dividend payment date

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Enquiries: Focusrite Plc: +44 1494 836301

Tim Carroll (CEO)

Jeremy Wilson (CFO)

Panmure Gordon +44 20 7886 2500

(Nominated Adviser and Broker)

Freddy Crossley

Erik Anderson

Belvedere Communications +44 20 3687 2756

John West

Llew Angus

The information communicated in this announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014. Notes to Editors Focusrite plc is a global music and audio products group that develops and markets proprietary hardware and software products. Used by recording professionals and musicians alike, its solutions facilitate the high-quality production of recorded and live sound. The Focusrite Group trades under four established and rapidly growing brands: Focusrite, Focusrite Pro, Novation and Ampify. With a high-quality reputation and a rich heritage spanning decades, its brands are category leaders in the music-making and audio recording industries. Focusrite and Focusrite Pro offer audio interfaces and other products for recording musicians, producers and professional audio facilities. Novation and Ampify products are used in the creation of electronic music, from synthesisers and grooveboxes to industry-shaping controllers and inspirational music-making apps. The Focusrite Group has a global customer base with a distribution network covering approximately 160 territories. Focusrite is headquartered in High Wycombe, UK, with marketing offices in Los Angeles and Hong Kong. Focusrite plc is traded on the AIM market, London Stock Exchange.

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Business and operating review

Overview

Focusrite is pleased to report Half Year Results that show continued growth. Total revenue for the period grew to £40.4 million (HY18: £38.8 million), with the Group’s gross margin increasing to 44.3% (HY18: 41.7%), resulting in EBITDA increasing to £8.9 million (HY18: £8.0 million) and diluted earnings per share increasing to 11.0 pence, up 23.6% from 8.9 pence in HY18. Research and development remains core to our strategy and a key driver of our growth. During this half year, we introduced two new hardware products and delivered five upgrades to existing products. We continue to refine our out-of-box experience, thereby significantly reducing the actual time between a consumer’s first contact with our products and making music. These efforts continue to be well received by our customers and are a key factor in our ongoing high Net Promoter Scores. In a possible range of scores from -100 to +100, our Net Promoter Scores are typically at least +60. Our strategy of innovation and expansion continues to underpin our growth and we remain committed to removing barriers to creativity for professionals and hobbyists alike. Our success is driven by our entrepreneurial and talented team, many of whom are themselves musicians, and their skill and loyalty are the bedrock of our success. To that end, our number of employees has grown to 230 globally. Operating review

Overall, the Group has continued to perform strongly both operationally and financially. Our roadmap continues to evolve, firmly planted in the three pillars of our strategy: grow our core customer base, increase lifetime value for our customers, and expand into new markets. We have established ourselves as a market leader and our aim is to capitalise further on this by continuing to excite and empower our customers. By improving the product and customer experience, we will seek to extend the customer lifecycle, encouraging them to use our products throughout their music-making lifetime. Innovation continues to be a core part of our company’s DNA and paramount to our success. We continue to spend circa 6% of annual revenue on research and development to provide a constant pipeline of new and relevant products for the people that buy our products. We launched two new products during the period: the SL Mark III 61 and 49 key master controller keyboards which have already won awards and accolades from various industry media outlets. Additionally, we released software and firmware updates for the Bass Station, Peak, Circuit, RedNet and Focusrite products. These updates provided significant benefits and upgrades in terms of functionality for these products, both delighting existing customers and attracting new customers as well. All of our launches have been well accepted and feedback from the consumer, retailer and distribution channels has been very positive.

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Segmental review

Six months to February 2019

Six months to February 2018

Year to August 2018

£’000 £’000 £’000

Focusrite 26,308 23,434 47,431 Focusrite Pro 2,594 2,259 4,762 Novation including Ampify 9,827 11,419 20,066 Distribution 1,696 1,707 2,862

Total 40,425 38,819 75,121

Focusrite Focusrite has increased by 12.3% to £26.3 million, with both the Scarlett and Clarett ranges increasing. Among existing products, our second generation Scarlett USB audio interface range has continued to gain market share since its launch in June 2016. The Clarett range has also seen growth in market share, as our USB range (introduced in 2018) continues to win over customers in the mid-range price categories. Focusrite Pro Focusrite Pro was carved out as a separate brand in 2017, when it became clear that equipment representing a substantial capital purchase for corporates required a different sales approach from the lower cost Scarlett range which was directed at new music creators and passionate music makers. Our Pro sales and marketing team continues to execute on their strategy of focusing on enterprise-level customers where audio over IP provides strategic benefits. This includes post production, broadcast, live sound and installed sound. Focusrite Pro is considered a leader in providing complete solutions for networked audio in these verticals. Consequently, Focusrite Pro has been the quickest growing segment of the Group, with revenue growth of 14.8% to £2.6 million. Novation The Novation segment is directed towards the creation of music and consists of the Novation and Ampify brands. In HY18, this segment grew by 19%, driven by the Launchpad range growing at 26%. This year, Launchkey and synthesisers generated solid results, but Launchpad, which is now in its fourth year, has declined leading to the Novation segment declining by 13.9% to £9.8 million. The Novation product pipeline for the next 18 months will yield a number of both updated and completely new products that will boost the portfolio. Ampify The London innovation division continues to disrupt the market with a growing portfolio of innovative music-making software. The new Ampify brand is driving awareness of music creation to a vast new market of music creators, which in turn supports the growth of the Focusrite and Novation brands. The suite of music apps has now reached an impressive 10.5 million downloads, and this number is increasing at around 120,000 per month. The team has also localised our most popular app, Launchpad, into Chinese with more languages to come. Software remains a crucial component of the business strategy to solve the problems of music creation, increasing customer loyalty and overall lifetime value. The Ampify team is growing and has a clear roadmap to expand the portfolio into more cross-platform music creation solutions that will both complement our hardware sales and attract new customers as well. Distribution As in previous years the Group distributes products in the UK, such as studio monitors and microphones manufactured by other organisations. Revenue was £1.7 million, similar to HY18.

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Whilst Focusrite’s distribution of adjacent products remains a small overall proportion of Group revenue, it is profitable, and it is important to us as it offers add-on products within the music-making industry and provides us with valuable market feedback and insight. Regional review

Six months to February 2019

Six months to February 2018

Year to August 2018

£’000 £’000 £’000

Europe, Middle East and Africa (EMEA) 19,315 15,997 29,706 North America 14,963 16,852 32,720 Rest of World 6,147 5,970 12,695

Total 40,425 38,819 75,121

The Group’s products are sold globally and performance can vary period on period depending on regional factors. EMEA represents 48% of Group revenue. EMEA produced a great result, growing 20.7% (constant currency: 18.4%) to £19.3 million. Brexit remains a meaningful area of uncertainty. Management have considered the cost and time implications of Brexit and put in place strategies to deal with the various outcomes. With regard to cost, the products sold by the Group have low rates of duty. Therefore the risk of significant double duty is modest. Notwithstanding this, the Group has discussed the principle of a warehouse within continental Europe with its operations provider, Kuehne + Nagel, and is confident that, if needed, this can be set up within a sensible timescale. With regard to the risk of export to continental Europe taking significant additional time, the Group ships stock via AEO (Authorised Economic Operator) accredited carriers who have the best chance of navigating the possible additional customs hurdles. Second, in many countries within Europe, the Group is selling to a distributor (who subsequently sells to retailers, who in turn sell to the consumer). This means that stock is often not needed next day. Finally, it is also relevant that some distributors within continental Europe ordered c£0.5 million additional stock in February, recognising the potential risk inherent in an uncertain Brexit solution. North America remains an important market for the Group and during the period accounted for 37% of Group Revenues. While revenue declined by 11.2%, (constant currency: a decline of 15.8%) to £15.0 million, gross profit in the North America region was broadly similar to the record level achieved in HY18. Across the US, the introduction of increased import tariffs caused upheaval in all industries in which product is routinely manufactured in China. Some of the Group’s products were impacted by this US governmental decision. In particular, the US import tariffs on many of the Focusrite products increased from 0% to 10% in October 2018. The Group decided that it had to act quickly to protect its margin and so it swiftly raised the Minimum Advertised Price (MAP) for these products in the US. For most products (and Scarlett in particular) demand was maintained despite the higher prices. For some products in the Novation ranges, demand was hit by the higher MAP for those products, but this was combined with the fact that demand for the ageing Launchpad range declined naturally in common with other regions of the world. The threat of a further increase in import tariffs from 10% to 25% remains. The Board is clear that it wishes to protect the profitability of the Group but is mindful of the fact that, if prices keep on being increased, at some point this will damage demand. Therefore the Group is actively considering other means of managing this increased cost and reducing its dependency on China-based manufacturing.

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The Rest of the World (‘ROW’) comprises mainly Asia and South America and comprises the remaining 15% of Group revenue. Overall, ROW grew by 3.0% (constant currency: decline of 1.2%) to £6.1 million. The trade war between China and the US affected the economy in many Asian countries. Despite this, the Group continued its healthy growth in the region, with revenue growing by 10.0%. Latin America fell by 3.8%, reflecting the local market turbulence in Argentina and Chile. Within the last year, the new regional sales manager has made great strides in changing some of the distributors and co-ordinating the Group’s e-commerce, marketing and logistics arrangements, as well as putting in place product localisation, to improve the offering to the customer. The Group believes this will pay dividends in the future.

Financial review

Overview Pleasingly, the Group has experienced another strong half year with expectations reached or exceeded in all key financial metrics. Group revenues grew by 4.1%, EBITDA grew by 11.4% and adjusted diluted earnings per share grew by 23.6%. Cash has also increased from £22.8 million at 31 August 2018 to £26.2 million at 28 February 2019, despite the payment of an increased FY18 final dividend of £1.3 million. Consequently, the Board has increased the interim dividend for FY19 to 1.2p, up 20.0% from 1.0p last year. Revenue Revenue grew 4.1% (0.5% at constant exchange rates) from £38.8 million to £40.4 million. This is lower revenue growth than in prior periods but it was expected due largely to the record revenue comparison in the first half of FY18 and the macroeconomic factors discussed in the operating review. Gross profit We are also pleased to announce that the gross margin grew to 44.3% (HY18, 41.7%). This was largely due to the initial effect of the price increases in the US. Without these, the gross margin would have been 43.3%, which is higher than the prior year, reflecting the product mix benefit of Focusrite Pro and the Group’s efforts to manage gross margin more effectively. Administrative expenses Administrative expenses consist of sales, marketing, operations, the uncapitalised element of R&D and central functions such as legal, finance and the Group Board. These expenses were £10.7 million, up from £10.0 million last year. The major growth areas were research and development (some of which was capitalised as in previous years), and sales and marketing (particularly the regional investments in the US and Asia). Research and development costs were increased to 6.5% of revenue, recognising the vital contribution of the research and development teams in developing the products that will generate future growth for the Group. Innovation is clearly a key focus for us and remains a key driver of growth. EBITDA EBITDA increased by 11.4% to £8.9 million (HY18: £8.0 million) due to the higher revenue, the price increases in the US, and the Group’s efforts to manage carefully the discounts offered to the distribution channel. EBITDA is used within the Group as a measure of underlying trading performance and it forms the basis of the incentivisation of some of the senior management within the Group. Depreciation and amortisation Depreciation is charged on tangible fixed assets on a straight-line basis over the assets’ estimated useful lives, normally ranging between two and five years. Amortisation is mainly charged on capitalised development costs, writing off the development cost over the life of the resultant product. In the half year, the development costs capitalised were £1.8 million (HY18: £1.4 million) and the amortisation was £1.0 million (HY18: £1.2 million).

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Non-underlying items The Group did not have any non-underlying items in either HY19 or HY18. Foreign exchange and hedging The exchange rates have been as follows:

Six months to 28 February

2019

Six months to 28 February

2018

Year to 31 August

2018

Exchange rates

Average $:£ 1.29 1.35 1.35

Average €:£ 1.13 1.13 1.13

Period end $:£ 1.33 1.38 1.30

Period end €:£ 1.17 1.13 1.12

The average US Dollar rate to sterling was $1.29 compared to $1.35 in HY18. The US Dollar accounts for approximately 50% of Group revenue so this improves revenue growth marginally. However, the Group also buys products in US Dollars and has some US Dollar operating costs, so there is a natural hedge. Therefore, the US Dollar’s strengthening increased revenue but had little effect on gross profit. The Euro rate was more consistent, remaining at €1.13. Approximately 30% of the Group’s revenue is in Euro with few Euro costs so any movement affects the profit. The Group seeks to mitigate this exposure through its hedging arrangements and aims to hedge 75% of net Euro flows. Irrespective of any operational complications associated with Brexit, a further effect of any (or no) Brexit solution could be a meaningful change in the Euro:GBP exchange rate. For example, in the week of the Brexit vote, the GBP weakened from €1.30 to €1.20. Some of this effect would be protected by the hedging arrangements. The remainder would flow through the income statement. Hedge accounting is used for these Euro to Sterling hedging contracts, meaning that the hedging contracts have been matched to income flows and, providing the hedging contracts remain effective, movements in fair value are shown in a hedging reserve in the balance sheet, until the hedge transaction occurs. Corporation tax Corporation tax as a proportion of profit before tax was 11% (HY18: 12%). The major part of the Group’s profits are taxed in the UK, where the headline rate is 19%. The effective tax rate is lower than this headline rate, due largely to enhanced tax relief on R&D costs. Earnings per share (EPS) The basic EPS for the half year increased to 11.1 pence, up 23.3% from 9.0 pence in HY18. The increase was largely due to the higher trading profit. The Group aims to ensure that all employees have options so the diluted earnings per share is also particularly relevant. This was 11.0 pence, up 23.6% from 8.9 pence in HY18. Balance sheet Non-current assets The non-current assets comprise mainly capitalised development costs; property, plant and equipment; and software. Approximately 70% of development costs are capitalised and they are amortised over three years. This policy is unchanged from last year.

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Working capital Working capital increased from 16.2% of revenue in HY18 to 19.8% of revenue in HY19. At this level, working capital remains controlled, and cash flow in the period was strong. However, it is important to note that stock would normally be expected to increase when a major range is introduced. This is due to a period of higher stock as the Group manufactures large quantities of the new range for the initial supply to the resellers as well as reducing stocks of the superseded range. This is likely in H2 of this financial year given our forthcoming product launches. Customers are pressed to ensure that they pay on time. At the half year, 96% of customer debts were within terms. Suppliers are paid on time. Cash flow The Group once again experienced a strong performance in its cash generation, with a total cash balance as at 28 February 2019 of £26.2 million. This was up from £22.8 million at 31 August 2018 and £19.7 million at 28 February 2018 respectively. There was no debt in either period. This increase in cash of £3.4 million in the period was despite paying an increased dividend costing £1.3 million. Therefore the free cash flow as a percentage of revenue was 12.0% versus a long-term average, since IPO of 10.1%. The Group has a committed five-year £10 million revolving credit facility with HSBC, expiring in December 2020. The cash balance, together with the debt facility, provides significant firepower for the Group to make an acquisition in line with its stated strategic initiative to expand into new markets. The Group continues to review acquisition targets, which fit the Board’s stringent criteria of: concentrating on businesses which are in closely related market segments; are earnings accretive; and well managed. Dividend The Board has approved an interim dividend of 1.2 pence per share, which is an increase of 20% over the FY18 interim dividend of 1.0 pence. Summary and outlook

Overall this was another pleasing performance with revenue exceeding that of the record revenue last year, and profit and cash rising more substantially. This has been reflected in the increased dividend. The Group needs to remain mindful of macroeconomic and political factors that affect its business, most notably import tariffs in the US, Brexit uncertainty and foreign exchange rates, but has strategies in place to deal with these. The Group has a strong new product pipeline with several important launches planned during 2019. We have established ourselves as a market leader and our aim is to capitalise further on this by continuing to excite and empower our customers. We look forward with continued confidence. Tim Carroll Jeremy Wilson Chief Executive Officer Chief Financial Officer

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Principal Risks and Uncertainties

Risk factors In common with all businesses, the Group faces risks, the effective management of which is necessary to enable it to achieve its strategic objectives and secure the resilience of the business for the long term. Management of risk is critical to the effective running of the business and is considered as part of the Group’s decision-making processes.

Risk area Description Mitigation

Economic environment The Group operates in the global economy and ultimately within the retail environment with products being sold to consumer end-user musicians. Such operations are influenced by global and national economic factors.

The Group sells products at all levels of the market in c.160 territories worldwide via two distinct product categories and is working to reduce reliance on any single product or territory.

Brexit

The impact of the decision to exit the European Union remains uncertain. There has already been foreign exchange volatility. It is probable that the UK will not be part of the customs union and the Group anticipates the imposition of some additional duties and minor disruption to the logistics network.

Approximately 30% of Group revenue is to continental Europe. This is supplied via the UK. The Group has previously increased selling prices in the UK to correct the imbalance caused by the significant foreign exchange rate changes. Additionally, the Group has considered the potential additional duty cost and has also discussed an operations contingency with its external provider, Kuehne + Nagel. Currently the additional duty cost is expected to be modest but the option of an additional distribution centre is feasible at moderate cost and lead time. Furthermore, the Group has discussed the delivery risks surrounding logistics with its external carriers, who are Authorised Economic Operator (AEO) accredited. Finally, it should be noted that the Group generally supplies a local distributor which then sells to the local retailers. This means that the Group’s sales are often not time critical because the rest of the distribution channel maintains its own local stock.

US tariffs In October 2018 the US implemented tariffs of 10% (potentially rising to 25% in mid 2019) on the importing of most products manufactured in China. The Group has product manufactured in China, so selling product in the US will become more expensive.

Within the US, the Group has increased the minimum advertised price to cover the additional tariffs. Additionally, the Group is considering alternative methods of manufacturing stock allowing both reduced duty and potentially some mitigation of wider product sourcing risks.

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Technological changes, product innovation and competition

The market for the Group’s products is characterised by continued evolution in technology, evolving industry standards, changes in customer needs and frequent new competitive product introductions. If the Group is unable to anticipate or respond to these challenges or fails to develop and introduce successful products on a timely basis, it could have an adverse impact on the Group’s business and prospects.

R&D remains one of the Group’s largest investments. The Group has a bespoke project system that facilitates the operation of a rigorous, disciplined product introduction process to ensure that as far as possible the fast-changing needs of its target markets are met. In addition, the Group continuously seeks efficiencies and minimises costs where possible.

Dependence on a small number of suppliers

The Group is dependent on a small number of suppliers, in particular its largest supplier, which supplies Focusrite interfaces. Failure or material delay by its suppliers to perform or failure by the Group to renew such arrangements could have a material adverse effect on the Group’s business, operating results and financial position.

The Group has supply agreements with four major Chinese manufacturers. The Group works with its resellers and distributors to ensure they are holding sufficient stock levels should there be disruption to the supply chain. Relationships are long-lasting and strong. Members of the operations department within Focusrite meet each supplier three to four times per year to review performance and costs.

Key resellers and distributors

In certain countries, including the US, the Group operates via a single distributor or has large individual reseller customers. In certain cases, a failure of or breakdown in the relationship with a key reseller or distributor, or even the failure of a major customer of that distributor, could significantly and adversely affect the Group’s business.

In cases where there is a large distributor in a significant market, the Group also communicates with the major retailers. In addition, the Group carefully monitors customer credit limits and has credit insurance which typically covers the majority of the customer debts outstanding at any point in time.

Development of the channels to market

Significant change in the methods by which end-users wish to buy Focusrite products could significantly affect the Group’s business.

The Group or its distributors sell to both ‘bricks and mortar’ and e-commerce retailers so that the Group can satisfy customer demand via both methods.

Currency risks The Group is exposed to currency and exchange rate fluctuations which may affect the Group’s revenue and costs when reported in Sterling.

There is a largely effective natural hedge for US Dollar transactions as the Group uses its generation of US Dollars to buy product in US Dollars. In addition, the Group mitigates its Euro exposure by entering into forward foreign exchange hedging contracts for the conversion of Euros to Sterling.

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Scarcity of experienced technical personnel

The nature of the Group’s business requires its employees in the technical and development teams to be highly skilled and experienced in their respective fields. The Group is dependent for its continued success on being able to attract, retain and motivate such individuals.

The Group is a leading company in the UK music industry and so attracts high-quality technical personnel. The Group also attracts graduates from music technology, electronics and engineering courses at renowned universities. The Group invests in developing its employees and incentivises them through wide-ranging share ownership incentives and other employment benefits to aid retention.

Intellectual property and data protection

The intellectual property and data developed by the Group is valuable and the Group could be harmed by infringement or loss.

The Group has established a programme for protecting its intellectual property and pursues infringements. The Group has data and information technology controls which are reviewed by the Group Board. Additionally, the Group includes data protection provisions in the contracts of all Group employees.

Information security Information security and cyberthreats are currently a priority across all industries and remain a key government agenda item.

The Group has carried out a detailed review of IT systems to identify elements requiring upgrade. There has already been a widespread upgrade of core IT functionality including cybersecurity (firewalls, anti-virus, mobile device management) and the implementation of backup and disaster recovery processes. The Group has moved core enterprise resource planning systems to the cloud with robust service level agreements in place to ensure data availability and security. The Group implemented a customer relationship management system to ensure GDPR compliance. There is an improving business continuity framework and a dedicated internal IT support team aided by external support providers.

FORWARD-LOOKING STATEMENTS

Certain statements in this half year report are forward looking. Although the Directors believe that their expectations are based on reasonable assumptions, any statements about future outlook may be influenced by factors that could cause actual outcomes and results to be materially different.

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Condensed Consolidated Income Statement

For the six months ended 28 February 2019

Note

Six months to 28 February

2019

Six months to 28 February

2018

Year to 31 August

2018

(unaudited) (unaudited) (audited)

£'000 £'000 £'000

Revenue 2 40,425 38,819 75,121 Cost of sales (22,504) (22,619) (43,447)

Gross profit 17,921 16,200 31,674 Administrative expenses (10,670) (9,970) (19,732)

EBITDA (non-GAAP measure) 8,881 7,969 15,485 Depreciation and amortisation (1,630) (1,739) (3,872) Non-underlying items - - 329

Operating profit 7,251 6,230 11,942 Finance income 75 1 4 Finance costs (176) (398) (274)

Profit before tax 7,150 5,833 11,672 Income tax expense 4 (790) (709) (1,199)

Profit for the period from continuing operations 6,360 5,124 10,473

Earnings per share

From continuing operations

Basic (pence per share) 6 11.1 9.0 18.4

Diluted (pence per share) 6 11.0 8.9 18.1

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Condensed Consolidated Statement of Other Comprehensive Income

For the six months ended 28 February 2019

Six months to 28 February

2019

Six months to 28 February

2018

Year to 31 August

2018

(unaudited) (unaudited) (audited)

£'000 £'000 £'000

Profit for the period 6,360 5,124 10,473 Items that may be reclassified subsequently to the income statement Exchange differences on translation of foreign operations (24) (30) 19 Gain on forward foreign exchange contracts designated and effective as a hedging instrument 785 743 541 Tax on hedging instrument (149) (144) (106)

Total comprehensive income for the period 6,972 5,693 10,927

Profit attributable to: Equity holders of the Company 6,972 5,693 10,927

6,972 5,693 10,927

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Condensed Consolidated Statement of Financial Position

Note

28 February

2019

28 February

2018

31 August

2018

(unaudited) (unaudited) (audited)

£'000 £'000 £'000

Assets Non-current assets Goodwill 419 419 419 Other intangible assets 6,308 4,818 5,620 Property, plant and equipment 1,211 1,369 1,275

Total non-current assets 3 7,938 6,606 7,314

Current assets Inventories 12,295 10,894 11,391 Trade and other receivables 12,254 10,811 13,310 Derivative financial instruments 7 842 258 100 Cash and cash equivalents 7 26,172 19,734 22,811

Total current assets 51,563 41,697 47,612

Total assets 59,501 48,303 54,926

Equity and liabilities Capital and reserves Share capital 58 58 58 Share premium 115 114 115 Merger reserve 14,595 14,595 14,595 Merger difference reserve (13,147) (13,147) (13,147) Translation reserve 26 1 50 Hedging reserve 682 210 46 EBT reserve (1) (2) (1) Retained earnings 46,949 36,451 41,731

Equity attributable to owners of the Company 49,277 38,280 43,447

Total equity 49,277 38,280 43,447

Current liabilities Trade and other payables 8,437 9,126 10,709 Provisions 200 - - Current tax liabilities 728 257 427

Total current liabilities 9,365 9,383 11,136

Non-current liabilities Deferred tax 859 640 300 Derivative financial instruments 7 - - 43

Total liabilities 10,224 10,023 11,479

Total equity and liabilities 59,501 48,303 54,926

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Condensed Consolidated Statements of Changes in Equity

For the six months ended 28 February 2019 Share capital

Share premium

Merger reserve

Merger difference

reserve Translation

reserve Hedging reserve

EBT reserve

Retained earnings Total

£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000

Balance at 1 September 2018 58 115 14,595 (13,147) 50 46 (1) 41,731 43,447

Profit for the period - - - - - - - 6,360 6,360 Other comprehensive income for the period - - - - (24) 636 - - 612

Total comprehensive income for the period - - - - (24) 636 - 6,360 6,972

Transactions with owners of the Company: Share-based payment deferred tax deduction in excess of remuneration expense - - - - - - - (303) (303) Share-based payment current tax deduction in excess of remuneration expense - - - - - - - 303 303 Shares from EBT exercised - - - - - - - 44 44 Shares withheld to settle employees’ tax obligations associated with share-based payments - - - - - - - (205) (205) Share-based payments - - - - - - - 162 162 Premium on shares awarded in lieu of bonuses - - - - - - - 175 175 Dividends paid - - - - - - - (1,318) (1,318)

Balance at 28 February 2019 58 115 14,595 (13,147) 26 682 (1) 46,949 49,277

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Condensed Consolidated Statements of Changes in Equity (Continued)

For the six months ended 28 February 2018

Share capital

Share premium

Merger reserve

Merger difference

reserve Translation

reserve Hedging reserve EBT reserve

Retained earnings Total

£'000 £’000 £'000 £'000 £'000 £'000 £'000 £'000 £'000

Balance at 1 September 2017 58 – 14,595 (13,147) 31 (389) (3) 31,739 32,884

Profit for the period – – – – – – – 5,124 5,124

Other comprehensive income for the period – – – – (30) 599 – – 569

Total comprehensive income for the period – – – – (30) 599 – 5,124 5,693

Transactions with owners of the Company: Share-based payment deferred tax deduction in excess of remuneration expense – – – – – – – (254) (254) Share-based payment current tax deduction in excess of remuneration expense – – – – – – – 661 661

Shares from EBT exercised – – – – – – 1 188 189

New shares issued – 114 – – – – – – 114

Share-based payments – – – – – – – 103 103

Dividends paid – – – – – – – (1,110) (1,110)

Balance at 28 February 2018 58 114 14,595 (13,147) 1 210 (2) 36,451 38,280

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Condensed Consolidated Statements of Changes in Equity (Continued)

For the year ended 31 August 2018 Share

capital Share

premium Merger reserve

Merger difference

reserve Translation

reserve Hedging reserve EBT reserve

Retained earnings Total

£'000 £’000 £'000 £'000 £'000 £'000 £'000 £'000 £’000

Balance at 1 September 2017 58 – 14,595 (13,147) 31 (389) (3) 31,739 32,884

Profit for the period – – – – – – – 10,473 10,473

Other comprehensive income for the period – – – – 19 435 – – 454

Total comprehensive income for the period – – – – 19 435 – 10,473 10,927

Transactions with owners of the Company:

Share-based payment deferred tax deduction in excess of remuneration expense – – – – – – – 95 95 Share-based payment current tax deduction in excess of remuneration expense – – – – – – – 698 698

Shares from EBT exercised – – – – – – 2 189 191

New shares issued – 115 – – – – – – 115

Share-based payments – – – – – – – 216 216

Dividends paid – – – – – – – (1,679) (1,679)

Balance at 31 August 2018 58 115 14,595 (13,147) 50 46 (1) 41,731 43,447

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Consolidated Statement of Cash Flow

For the six months ended 28 February 2019

Six months to 28 February

2019

Six months to 28 February

2018

Year to 31 August

2018

£'000 £'000 £'000 Cash flows from operating activities Profit for the period 6,360 5,124 10,473 Adjustments for: Income tax expense 790 709 1,199 Net finance charge/(income) 101 397 270 Loss/(profit) on disposal of property, plant and equipment - - (14) Amortisation of intangibles 1,271 1,399 2,804 Depreciation of property, plant and equipment 359 340 740 Movement in provisions 200 - - Share-based payment charge 162 103 216

Operating cash flow before movements in working capital 9,243 8,072 15,688 Decrease/(increase) in trade and other receivables 1,056 2,141 (358) (Increase) in inventories (904) (2,560) (3,057) (Decrease)/increase in trade and other payables (2,272) 1,406 2,989

Operating cash flow before interest and tax paid 7,123 9,059 15,262 Net interest received/(paid) 75 (29) (36) Income tax paid (79) (253) (478)

Net cash inflow from operating activities 7,119 8,777 14,748

Cash flows from investing activities Purchases of property, plant and equipment (295) (340) (632) Development of intangible assets (1,959) (1,673) (3,880)

Net cash used in investing activities (2,254) (2,013) (4,512)

Cash flows from financing activities Issue of equity shares 14 303 306 Equity dividends paid (1,318) (1,110) (1,679)

Net cash used in financing activities (1,304) (807) (1,373)

Net increase in cash and cash equivalents 3,561 5,957 8,863 Net foreign exchange movement (200) (397) (226) Cash and cash equivalents at beginning of the period 22,811 14,174 14,174

Cash and cash equivalents at end of the period 26,172 19,734 22,811

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Notes to the Condensed Consolidated Interim Financial Statements

1. Basis of preparation and significant accounting policies

Focusrite Plc (the ‘Company’) is a company incorporated in the UK. The condensed consolidated interim financial statements (‘interim financial statements’) as at and for the six months ended 28 February 2019 comprised the Company and its subsidiaries (together referred to as the ‘Group’). The Group is a business engaged in the development, manufacture and marketing of professional audio and electronic music products.

Statement of compliance

The interim financial statements are for the six months ended 28 February 2019 and are presented in pounds Sterling (‘GBP’). This is the functional currency of the Group. The statement is presented to the nearest £1,000 (‘£’000’). The interim financial report has been prepared in accordance with the International Financial Reporting Standards (‘IFRS’), International Accounting Standards (‘IAS’) and interpretations currently endorsed by the International Accounting Standards Board (‘IASB’) and its committees as adopted by the EU and as required to be adopted by AIM listed companies. AIM listed companies are not required to comply with IAS 34 'Interim Financial Reporting' and accordingly the Company has taken advantage of this exemption. They do not include all the information required for a complete set of IFRS financial statements. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group’s financial position and performance since the last annual consolidated financial statements as at and for the year ended 31 August 2018. These interim financial statements were authorised for issue by the Company’s Board of Directors on 30 April 2019. The comparative figures for the financial year ended 31 August 2018 are not the Company’s statutory accounts for that financial year. Those accounts have been reported on by the Company’s auditor and delivered to the registrar of companies. The report of the auditor was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

Significant accounting policies

The interim financial statements have been prepared in accordance with the accounting policies adopted in the Group’s financial statements for the year ended 31 August 2018, with the exception of the following:

Adoption of IFRS 15 ‘Revenue from Contracts with Customers’

IFRS 15 was adopted by the Group on 1st September 2018, using the modified retrospective transition method. For the majority, by volume and value, of the Group’s contracts with customers there are no recognition or measurement differences between the new Standard and IAS 18, and therefore the impact of transition to the Group’s revenue, profits and net assets is not material.

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IFRS 15 applies a five-step model to the accounting for revenue from contracts with customers, based upon the principle that the Group should recognise revenue in a way that depicts the transfer of promised goods or services (‘performance obligations’) to customers, in an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services. The revenue is apportioned to performance obligations using their relative stand-alone selling prices. The Group’s performance obligations typically consist of supplying of goods on a point in time basis.

Adoption of IFRS 9 ‘Financial Instruments’

IFRS 9 was adopted by the Group on 1st September 2018. The Standard introduced new requirements for the classification and measurement of financial assets, impairment of financial assets and hedge accounting. For the new impairment requirements, the Group recognises an ‘Expected Credit Loss’ (‘ECL’) for trade receivables under the Standard’s ‘simplified approach’. With regard to hedge accounting, all of the Group’s hedging arrangements remain eligible for hedge accounting under IFRS 9. No adjustments have been made in respect of IFRS 9 to the Group’s opening reserves at 1st September 2018 as an impact assessment concluded that the ECL impairment adjustment was immaterial to the Group by considering historic credit loss rates, determining that there are no indicators that the historic loss rates will change significantly and applying expected loss rates to opening balances.

1.1 Basis of consolidation

The consolidated financial statements comprise the financial statements of the Company and subsidiaries controlled by the Company drawn up to 28 February 2019.

1.2 Subsidiaries

Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Group takes into consideration potential voting rights that are currently exercisable. The acquisition date is the date on which control is transferred to the acquirer. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date control ceases.

1.3 Going concern

The Board of Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, the financial statements have been prepared on a going concern basis.

1.4 Earnings per share

The Group presents basic and diluted earnings per share (‘EPS’) data for its ordinary shares. Basic EPS is calculated by dividing the profit attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. For diluted EPS, the weighted average number of ordinary shares is adjusted for the dilutive effect of potential ordinary shares arising from the exercise of granted share options.

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1.5 Accounting estimates and judgements

In application of the Group’s accounting policies, the Directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

In preparing these condensed consolidated interim financial statements, the significant judgements made by the Directors in applying the Group’s accounting policies and key sources of estimation uncertainty were the same as those applied to the Group’s financial statements for the year ended 31 August 2018.

1.6 Foreign currencies

The individual financial statements of each subsidiary are presented in the currency of the primary economic environment in which it operates (its functional currency). Sterling is the predominant functional currency of the Group and presentation currency for the consolidated financial information. In preparing the financial statements of the individual companies, transactions in currencies other than the entity’s functional currency (foreign currencies) are recognised at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences are recognised in profit or loss in the period in which they arise except for:

• Exchange differences on transactions entered into to hedge certain foreign currency risks;

• Exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation), which are recognised initially in other comprehensive income and reclassified from equity to profit or loss on disposal or partial disposal of the net investment.

For the purpose of presenting consolidated financial information, the assets and liabilities of the Group’s foreign operations are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the date of the transactions are used. Exchange differences arising, if any, are recognised in the income statement.

1.7 Hedge accounting

The Group has adopted hedge accounting for qualifying transactions. Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at each balance sheet date. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship. The Group designates certain derivatives as either hedges of the fair value of recognised assets or liabilities of firm commitments (fair value hedges), hedges of highly probable forecast transactions or hedges of foreign currency risk of firm commitments (cash flow hedges), or hedges of net investments in foreign operations.

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Cash flow hedges Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability, or a highly probable forecast transaction, the effective part of any gain or loss on the derivative financial instrument is recognised directly in the hedging reserve. Any ineffective portion of the hedge is recognised immediately in the income statement. For cash flow hedges, the associated cumulative gain or loss is removed from equity and recognised in the income statement in the same period or periods during which the hedged forecast transaction affects profit or loss. When a hedging instrument expires or is sold, terminated or exercised, or the entity revokes designation of the hedge relationship but the hedged forecast transaction is still expected to occur, the cumulative gain or loss at that point remains in equity and is recognised in accordance with the above policy when the transaction occurs. If the hedged transaction is no longer expected to take place, the cumulative unrealised gain or loss recognised in equity is recognised in the income statement immediately. A derivative with a positive fair value is recognised as a financial asset whereas a derivative with a negative fair value is recognised as a financial liability.

2. Revenue

An analysis of the Group’s revenue is as follows:

Six months to February 2019 Six months to February 2018

EMEA

North America

Rest of World

Total

EMEA North

America Rest of World

Total

£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

Focusrite 11,975 10,580 3,753 26,308 9,019 10,953 3,462 23,434

Focusrite Pro 642 1,562 390 2,594 660 1,346 253 2,259

Focusrite segment 12,617 12,142 4,143 28,902 9,679 12,299 3,715 25,693

Novation segment 5,002 2,821 2,004 9,827 4,611 4,553 2,255 11,419

Distribution segment 1,696 - - 1,696 1,707 - - 1,707

Total 19,315 14,963 6,147 40,425 15,997 16,852 5,970 38,819

Year to August 2018

EMEA

North America

Rest of World

Total

£’000 £’000 £’000 £’000

Focusrite 17,687 22,402 7,342 47,431

Focusrite Pro 1,528 2,538 696 4,762

Focusrite segment 19,215 24,940 8,038 52,193

Novation segment 7,629 7,780 4,657 20,066

Distribution segment 2,862 - - 2,862

Total 29,706 32,720 12,695 75,121

In the HY18 interim report the Group disclosed revenue earned in Canada within the Rest of the World region. In the FY18 Annual Report and subsequent financial statements the Group discloses revenue earned in Canada within the North America region. The table below sets out the regional analysis of revenue under the previous classification:

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Six months to February 2019 Six months to February 2018

EMEA USA Rest of World

Total

EMEA USA Rest of World

Total

£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

Focusrite 11,975 10,139 4,194 26,308 9,019 10,532 3,883 23,434

Focusrite Pro 642 1,535 417 2,594 660 1,278 321 2,259

Focusrite segment 12,617 11,674 4,611 28,902 9,679 11,810 4,204 25,693

Novation segment 5,002 2,593 2,232 9,827 4,611 4,313 2,495 11,419

Distribution segment 1,696 - - 1,696 1,707 - - 1,707

Total 19,315 14,267 6,843 40,425 15,997 16,123 6,699 38,819

Year to August 2018

EMEA USA Rest of World

Total

£’000 £’000 £’000 £’000

Focusrite 17,687 21,389 8,355 47,431

Focusrite Pro 1,528 2,385 849 4,762

Focusrite segment 19,215 23,774 9,204 52,193

Novation segment 7,629 7,410 5,027 20,066

Distribution segment 2,862 - - 2,862

Total 29,706 31,184 14,231 75,121

3. Operating segments Products and services from which reportable segments derive their revenues Information reported to the Group’s Chief Executive Officer (who has been determined to be the Group’s Chief Operating Decision Maker) for the purposes of resource allocation and assessment of segment performance is focused on the main product groups which the Group sells. While the results of Focusrite and Focusrite Pro are reported separately to the Board, they are aggregated together for the purposes of segmental reporting. Similarly, the results of Novation and Ampify also met the aggregation criteria set out in IFRS 8 segmental reporting. The Group’s reportable segments under IFRS 8 are therefore as follows:

Focusrite - Sales of Focusrite and Focusrite Pro branded products

Novation - Sales of Novation and Ampify branded products

Distribution - Distribution of third-party brands, including KRK speakers, Stanton, Cerwin Vega, Cakewalk and sE Electronics

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The revenue and profit generated by each of the Group's operating segments are summarised as follows:

Six months to 28 February

2019 Six months to

28 February 2018 Year to

31 August 2018

(unaudited) (unaudited) (audited)

£'000 £'000 £'000

Revenue from external customers

Focusrite 28,902 25,693 52,193

Novation 9,827 11,419 20,066

Distribution 1,696 1,707 2,862

Total 40,425 38,819 75,121

Segment profit

Focusrite 14,850 12,503 25,107

Novation 5,013 6,000 10,063

Distribution 424 481 795

20,287 18,984 35,965

Central distribution costs and administrative expenses (13,036) (12,754) (24,352)

Non-underlying items - - 329

Operating profit 7,251 6,230 11,942

Finance income 75 1 4

Finance costs (176) (398) (274)

Profit before tax 7,150 5,833 11,672

Tax (790) (709) (1,199)

Profit after tax 6,360 5,124 10,473

Segment profit represents the profit earned by each segment without allocation of the share of central administration

costs, including Directors’ salaries, finance income and finance costs, and income tax expense. This is the measure

reported to the Group’s Chief Executive Officer for the purpose of resource allocation and assessment of segment

performance.

Central administration costs comprise principally the employment-related costs and other overheads incurred by the

Group. Also included within central administration costs is the charge relating to the share option scheme of £162,000

for the six-month period to 28 February 2019 (six months to 28 February 2018: £103,000; year to 31 August 2018:

£216,000).

Segment net assets and other segment information

Management does not make use of segmental data relating to net assets and other balance sheet information for the

purposes of monitoring segment performance and allocating resources between segments. Accordingly, other than the

analysis of the Group’s non-current assets by region shown below, this information is not available for disclosure in the

consolidated financial information.

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The Group’s non-current assets, analysed by region, were as follows:

28 February 2019 28 February 2018 31 August 2018

(unaudited) (unaudited) (audited)

£'000 £'000 £'000

Non-current assets

USA 68 99 81

Europe, Middle East and Africa 7,335 5,865 6,705

Rest of World 535 642 528

Total non-current assets 7,938 6,606 7,314

4. Taxation The tax charge for the six months to 28 February 2019 is based on the estimated tax rate for the full year in each

jurisdiction.

5. Dividends The following equity dividends have been declared:

Six months to 28 February

2019 (unaudited)

Six months to 28 February

2018 (unaudited)

Year to 31 August

2018 (audited)

Dividend per qualifying ordinary share 1.20p 1.00p 3.30p

During the period, the Company paid a final dividend in respect of the year ended 31 August 2018 of 2.30 pence per share, amounting to £1,318,000.

6. Earnings per share

Reported earnings per share

The calculation of the basic and diluted earnings per share is based on the following data:

Six months to 28 February

2019 (unaudited)

Six months to 28 February 2018

(unaudited)

Year to 31 August

2018 (audited)

Earnings £'000 £'000 £'000

Earnings for the purposes of basic and diluted earnings per share being net profit for the period 6,360 5,124 10,473 Non-underlying items - - (329) Tax on non-underlying items - - 63 Total underlying profit for adjusted EPS calculation 6,360 5,124 10,207

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Six months to 28 February

2019

Six months to 28 February

2018

Year to 31 August

2018

number number number

Number of shares '000 '000 '000

Weighted average number of ordinary shares for the purposes of basic earnings per share calculation 57,222 56,690 56,825

Effect of dilutive potential ordinary shares:

EMI share option scheme and unapproved share option plan 856 1,151 1,151

Weighted average number of ordinary shares for the purposes of diluted earnings per share calculation

58,078 57,841 57,976

Earnings per share Pence Pence Pence

Basic EPS 11.1 9.0 18.4

Diluted EPS 11.0 8.9 18.1

Adjusted basic EPS 11.1 9.0 18.0

Adjusted diluted EPS 11.0 8.9 17.6

At 28 February 2019, the total number of ordinary shares issued and fully paid was 58,111,639. This included 795,499

shares held by the Employee Benefit Trust (‘EBT’) to satisfy options vesting in future years. The operation of this Employee

Benefit Trust is funded by the Group so the EBT is required to be consolidated, with the result that the weighted average

number of ordinary shares for the purpose of the basic earnings per share calculation is the net of the weighted average

number of shares in issue (58,111,639) less the weighted average number of shares held by the Employee Benefit Trust

(890,019). It should be noted that the only right relinquished by the Trustees of the Employee Benefit Trust is the right to

receive dividends. In all other respects, the shares held by the Employee Benefit Trust have full voting rights.

The effect of dilutive potential ordinary share issues is calculated in accordance with IAS 33 and arises from the employee share options currently outstanding, adjusted by the profit element as a proportion of the average share price during the period.

7. Financial instruments

The fair value of the Group’s derivative financial instruments is calculated using the quoted prices. Where such prices are not available, a discounted cash flow analysis is performed using applicable yield curve for the duration of the instruments for non-optional derivatives, and option pricing model for optional derivatives. Foreign currency forward contracts are measured using quoted forward exchange rates and yield curves derived from quoted interest rates matching maturities of the contract. IFRS 13 Fair Value Measurements requires the Group’s derivative financial instruments to be disclosed at fair value and categorised in three levels according to the inputs used in the calculation of their fair value.

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Financial instruments carried at fair value should be measured with reference to the following levels:

• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). The financial instruments held by the Group that are measured at fair value all related to financial assets/(liabilities)

measured using a Level 2 valuation method.

The fair value of financial assets and liabilities held by the Group are:

28 February

2019

28 February

2018

31 August

2018

(unaudited) (unaudited) (audited) £'000 £'000 £'000

Financial assets Amortised cost Cash and cash equivalents 26,172 19,734 22,811 Trade and other receivables 11,533 10,243 11,542 Designated cash flow hedge relationships Derivative financial assets designated and effective as cash flow hedging instruments

842 258 57

38,547 30,235 34,410

Financial liabilities Amortised cost Trade and other payables 5,326 8,861 6,441

5,326 8,861 6,441

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Independent Review Report to Focusrite Plc

Conclusion

We have been engaged by the company to review the condensed set of financial statements in the half-yearly report for the six months ended 28 February 2019 which comprises Condensed Consolidated Income Statement, Condensed Consolidated Statement of Other Comprehensive Income, Condensed Consolidated Statement of Financial Position, Condensed Consolidated Statements of Changes in Equity, Consolidated Statement of Cash Flow and the related explanatory notes.

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly report for the six months ended 28 February 2019 is not prepared, in all material respects, in accordance with the recognition and measurement requirements of International Financial Reporting Standards (IFRSs) as adopted by the EU and the AIM Rules

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. We read the other information contained in the half-yearly report and consider whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

The impact of uncertainties due to the UK exiting the European Union on our review

Uncertainties related to the effects of Brexit are relevant to understanding our review of the condensed financial statements. Brexit is one of the most significant economic events for the UK, and at the date of this report its effects are subject to unprecedented levels of uncertainty of outcomes, with the full range of possible effects unknown. An interim review cannot be expected to predict the unknowable factors or all possible future implications for a company and this is particularly the case in relation to Brexit.

Directors’ responsibilities

The half-yearly report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly report in accordance with the AIM Rules.

The annual financial statements of the group are prepared in accordance with IFRSs as adopted by the EU. The directors are responsible for preparing the condensed set of financial statements included in the half-yearly financial report in accordance with the recognition and measurement requirements of IFRSs as adopted by the EU.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly report based on our review.

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The purpose of our review work and to whom we owe our responsibilities

This report is made solely to the company in accordance with the terms of our engagement. Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.

Michael Froom for and on behalf of KPMG LLP Chartered Accountants One Snowhill Snow Hill Queensway Birmingham B4 6GH 30 April 2019


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